Stocks were broadly lower on Thursday, with the Dow Jones Industrial Average (^DJI 0.50%) losing more than 150 points and the S&P 500 (^GSPC 0.62%) down almost a full percentage point.
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Financial and healthcare stocks retreated after recent gains: The Vanguard Financials ETF (VFH -0.14%) lost 0.8% and the Health Care Select Sector SPDR ETF (XLV 0.64%) gave up 1.3%.
Two retailers announced June sales today. L Brands (BBWI 1.97%) surprised observers with results that were weaker than already low expectations, and Costco Wholesale (COST 1.73%) delivered strong gains.
L Brands turns in a skimpy month
Shares of specialty retailer L Brands -- owner of Victoria's Secret, PINK, and Bath & Body Works -- plunged 14.1% after the company announced June sales that fell more than the market was expecting. Net sales decreased 6% to $1.213 billion and comparable sales fell 9% -- notably more than the company guidance given in May of a decline in "mid-single digits." The problem was centered on the Victoria's Secret unit, where comparable sales were down 17% from last year. Bath & Body Works delivered comp growth of 8%.
Sales at L Brands continue to be impacted by the company's decision in May 2016 to exit swimwear and some apparel categories in Victoria's Secret in order to focus on the brand's traditional strengths in lingerie and beauty products. The discontinued lines accounted for 10 percentage points of the drop in Victoria's Secret and 7 of the 9 points of decline in overall comparable sales. Even though the contraction due to that decision was expected, the market apparently was not pleased.
Looking forward to July sales, L Brands offered little encouragement that things would pick up. The company expects comps to fall mid-single digits, with the discontinued lines accounting for 4 percentage points of the decline. Two months ago L Brands had guided that full-year comps excluding Victoria's Secret swimwear and apparel would be up low-single digits, so the projection of a continued decline in July could put that in jeopardy.
Costco delivers strong June sales
Costco Wholesale rang up some impressive sales in June, as the members-only warehouse reported net sales that increased 7% from last year and comparable sales that rose 6%. Excluding gasoline and the effects of currency, comps in the U.S. were up 6.3%, Canada grew 6.8%, and "other international" increased 7.1%. The stock initially rose 2.1% on the news but ultimately ended down 0.6% on a weak day for the market.
Sales increased in all major categories, including a mid-single-digit increase in food and sundry items and a high-single-digit gain in hard lines. The U.S. front end basket -- a measure of average item prices -- was slightly inflationary, and the average transaction rose 1.5%. Traffic increased an impressive 4% worldwide compared with last year.
Costco stock took a big hit when Amazon announced its purchase of Whole Foods Market, declining more than 12% since then on worries over the threat the internet retailing giant poses to the grocery business. But Costco continues to retain its members and attract them to the stores -- for non-food items as well as groceries. The impact of the merger is still unknown, but in the meantime, Costco's business appears to be quite healthy.